Three of five people in the world still do not have access to the Internet. From the perspective of standard economic models, this is puzzling. The supply of international connectivity has expanded dramatically since 2009, when several submarine fiber cables came online connecting even the poorest countries in Africa to the global Internet. Also, with only a few exceptions, nearly every developing country now has some form of competitive market for broadband services.

Despite this, few of these countries are close to achieving the UN Broadband Commission’s goal of entry-level broadband services priced at less than 5 percent of average monthly income. The Affordability Report, released last month by the Alliance for Affordable Internet Internet (A4AI), a consortium of private companies and public sector organizations dedicated to bringing Internet costs down through policy change, found that in at least 46 countries “the cost of entry-level broadband services exceeds 40 percent of monthly income for people living under $2/day, and in many countries exceeds 80 percent or even 100 percent of monthly income” (I co-authored the Affordability Report with Sonia Jorge).

One of the most interesting findings in the report is that at the global level, the majority of people for whom broadband is unaffordable live not in the poorest countries, but in larger (lower) middle-income countries with high income inequality, such as China, India and Brazil. We found that many of these countries serve high-end broadband customers in urban areas quite well. However, poorer communities in urban and rural areas remain underserved because of seemingly weak demand, giving network operators limited incentive to invest in these markets. These mechanisms reinforce one another, creating an “access trap” by further limiting demand and discouraging new market entrants.

A4AI’s Policy & Regulatory Best Practices are the start of a consensus about how countries escape this access trap, but coordinating multiple efforts towards a beneficial public outcome remains a challenge. For example, policy makers can drive demand by making broadband relevant to people living in poor communities. Perhaps the best way to achieve this is to update the governance of critical public services, such as health, education and water, for the mobile broadband era. Cloud-based solutions such as Form Hub can help teams more effectively deliver clean water and health services working across massive geographical areas. As public services drive people to adopt mobile broadband, the private sector will likely develop and offer services to meet the needs of new users, including poorer communities.

Further, policy makers can take steps to lower the cost, and thus the risk, of investing in under-served communities. Google’s Project Link is providing an open access fiber-optic network around Kampala, Uganda, to help Internet service providers reach end users with faster speeds at lower prices. Policy makers can play a similar role by building the Internet into other basic infrastructure. For example, fiber ducts can be built into roads, easing negotiations with local authorities for advanced services such as fiber to the home. Many developing countries also have extensive under-utilized spectrum, which can lead to much faster, much cheaper mobile broadband in rural communities.

We still have much to learn about which policies are most effective at which stages of a country’s Internet infrastructure development. However, we know the stakes couldn’t be higher. McKinsey recently found that the Internet could contribute $300 billion to Africa’s economy by 2025. The A4AI Affordability Report makes it clear that many countries still have a long way to go to realize these social and economic gains, but that governments can make decisions now to ensure a broadband-enabled future comes much more quickly.

The 200 sovereign state members of the United Nations International Telecommunications Union (ITU) will gather in Dubai this week for the World Conference of International Telecommunications (WCIT). The WCIT is a treaty developed to facilitate global interconnection and interoperability between telecommunications carriers. The treaty was last reviewed in 1988, an era where the majority of telecommunications networks were state owned and controlled.[Read more…]

[Editor’s note: Tomorrow, Josh Goldstein is presenting on this topic as part of the CITP Luncheon Series, at the Woodrow Wilson School on Princeton’s campus. (12:10pm, in Robertson Hall room 023)]

Around the world, societies generally agree that governments and bureaucrats should use the coercive power of the state, not to create extractive institutions that appropriate resources to the powerful elite, but rather to create inclusive institutions, which re-distribute political power and underpin economic institutions that provide incentive for investment and innovation (Acemoglu, Johnson & Robinson 2004). The Open Government Partnership (OGP), a high-level political movement dedicated to transparency, responsiveness and accountability, is underpinned by the notion that institutions, rather than culture or geography, are the fundamental cause of long-run growth, and that inclusive politics shapes economic institutions, rather than the other way around.[Read more…]

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